The next objective is geological exploration of shelf

Olga Loskutova

Saint-Petersburg hosted the 7th International conference and exhibition on oil and gas resources development of Russian Arctic and CIS continental shelf (RAO/CIS Offshore). Such forum is held on the banks of the Neva every two years (since 1993) and is the only specialized function on the issues of shelf development.

As usual, such world-famous companies as Gazprom, Rosneft, LUKOIL, Sevmorneftegaz, Zarubezhneft, Chornomorneftegas, Hydro, BP, Statoil, Kellog Brown&Root, Total, Siemens and DNV took part in the conference. Equipment and ship manufacturers Sevmash, Admiralty Shipyards, leading research centers VNIIOkeangeologia, Sevmorgeo, Gubkin Russian State University of Oil and Gas, VNIIGAS, Arctic and Antarctic research institute, Morneftegazprojekt, SOE CDB ME Rubin, FSUE SPMDB Malachite, CDB Korall, the Krylov Shipbuilding Research Institute, FSUE CRISM Prometey , etc., also participated in the conference and exhibition.

The conference program covered the issues of geology, survey, design of marine structures, gas- and oil-field construction, environmental and industrial safety and international cooperation in developing of arctic and far eastern sea shelf.

Recently, emphasis of oil-and-gas production has been steadily put on the reserves concealed in the ocean. Russia has the most extensive shelf in the world, 85% of which falls at arctic sector. It is a storeroom of hydrocarbons reserves that will last for the entire century.

“The Russian government gives top priority to the problem of shelf development and this year has considered the possibilities to increase efficiency of these operations”, said Yuri Trutnev, Minister of natural resources, in his report. “Compared to other regions of the world, exploration and development of sea hydrocarbon resources on the Russian shelf have certain specialties that determine the level of investment appeal and competitive ability of our deposits. The arctic shelf is known for its severe climatic and ice conditions. Besides, there is no coastal infrastructure or developed transportation system on the coast of northern seas. Therefore, operations on the shelf call for considerable investments and latest equipment and technologies. However, even with high cost of resources development, discovery of such huge deposits counterbalances the risks and compensates for expenses. Yet, the pay-back period is quite long, it may stretch for decades. Thus, the government and our Ministry are facing the task of increasing investment appeal of offshore development, for which purpose a number of key problems will have to be solved:

  • promotion of geological exploration of the shelf;
  • alteration of regulatory and legal framework for shelf projects;
  • generation of economic incentives provisions;
  • creation of favorable conditions for developing coastal transport infrastructure;
  • development of environmental norms and regulations in accordance with worldwide requirements.

Unfortunately, in the nineties of the last century the amount of geological exploration decreased due to lack of financing from the government, as well as from companies-subsoil users. Before 1992 volumes of oil and gas production on the continental part of Russia exceeded those of mining operations, but from 1992 to 1998 amounts of exploration drilling and seismic prospecting have declined drastically. Accordingly, amount of resources has started to decrease. In order to improve the situation, government of Russia has adopted a far-reaching program this year, aiming at rehabilitation of mineral resources for the period till 2020. Starting from 2006, federal budget allocations on geological exploration will increase annually, over half of the means will be assigned for exploring promising regions of the Russian Federation, and first of all, the shelf. This way, in the nearest 15 years Russia will invest over 33 billion rubles in the sea exploration. Till 2010, main regional activities will be focused in Barents, Kara Seas and Sea of Okhotsk, where large oil and gas fields were discovered. From 2011 to 2020 operations will be slowly moved over to eastern Arctic.

It is expected that on completion of exploration work around 10 to 15 prospects will be prepared in 2007 – 2015, followed in 2011 – 2020 by discovery of huge hydrocarbon deposits there. In order to attract private companies to shelf exploration, 20 prospect blocks are scheduled for auctioning at six tenders in the nearest 5 years. The blocks are situated in those areas of Barents and Pechora Seas, where hydrocarbon deposits were discovered. 12 prospect blocks with confirmed resources are expected to be auctioned till 2010. The blocks are distributed among five tenders, covering two shelf regions of the Sea of Okhotsk, as well as Sakhalin and Magadan regions. One-off payments from these auctions may amount to 1.8 – 5 billion dollars.

Stimulation of operations on shelf examination from 2006 till 2020 will complete its exploration cycle. Total expenditure of the federal budget will exceed 1 billion dollars. Investments from subsoil users are expected to come up to 4.5 billion dollars. According to very moderate estimates, it will provide the increment of hydrocarbon recoverable reserves of 5 to 8 billion tons of equivalent fuel.

The minister has underlined that for giving an economic incentive to subsoil users it is necessary to introduce alterations in tax legislation as current tax treatment is not suitable for such capital-intensive projects as development of northern seas.

“Joint efforts of domestic and foreign companies are required to carry out the shelf development project”, said the Minister. “As for infrastructural projects, first of all we’ll have to complete shelf exploration and grant the right of use of the shelf plots. Only after that we should be able to understand the market and schemes of the required transport infrastructure. Development of environmental norms and regulations that will meet latest international requirements is also pending, as even a small accident at sea may lead to drastic changes in the ocean ecosystem. In this respect we could use the experience of other countries.”

It won’t be long now before oil from Pechora Sea shelf is available. In 2007, Sevmorneftegaz will install Prirazlomnaya platform at the depth of 20 m and will start commercial production of oil. Development of Prirazlomnoye oil field, followed by that of Shtokmanovskoye gas-condensate field will have a profound effect on the economy of the Russian European North.

The beginning of operations on the continental arctic shelf will be a landmark in the development of fuel and energy complex of Russia and CIS countries,” said Boris Nikitin, first deputy director of Department of gas, condensate and oil recovery of Gazprom, in his report at the conference. “All projects of shelf development are technically complicated and call for latest advanced technologies and facilities, as well as for major financial resources. World experience suggests that shelf development projects should be carried out by joint efforts of strong international companies, as it was happening during developing of shelf and offshore fields of the North Sea.”

Mobile ice-resistant drilling rigs will be required for speeding-up field development, as they will ensure year-round construction of production and prospect wells, as well as underwater production units. Construction of a new ice-resistant platform, including designing, won’t take more than five years. Presently available drilling rigs and self-elevating drilling rigs Amazon and Arkticheskaya, currently under construction, and drilling control board Obsky are operational in three ice-free months in a year, which is enough for carrying out exploration work in Kara Sea.

Development of the fields will boost economic development of the entire Area and neighboring regions have a positive social effect, create new workplaces. Industry and infrastructure of Yamal peninsular will begin to develop.

Go to Index of # 4(14) 2005


# 4(14), 2005
Ocean and shelf exploration